Natural monopolies really don't occur very often compared to the myth perpetuated by greedy rent-seekers like AT&T and Comcast. Sure, in Econ 101, the argument is made that the duplicative effects of having multiple companies run wire to each home are so high that the marketplace can only sustain 1 profitable company. But the market is "dynamic and rivalrous," meaning that technological forces ensure no single company will maintain the lowest average cost curve for very long.
Currently, the FCC prevents any other company from laying down wire (not to mention a myriad of local and state regulations). But how can we know if competition can sustain itself unless we give it a chance? Cable companies and telcos have essentially bought off public officials, offering a cut of their huge profits if local lawmakers will grant them government-enforced monopoly status.
Laying wire isn't cheap, but if you look at rate of return for telcos in unregulated services it's close to 50%. A second competitor may have to undertake a large initial capital investment to enter the market, but there is so much demand for packet-based services that multiple companies could coexist and still make money. After all, we have 2 sets of wires running currently with much the same services increasingly available (triple play) and cable was only installed a few decades ago. Even if no one enters, the potential for entry itself deters monopolistic pricing-as opposed to the current system where the telcos and cable companies do not even face the theoretical possibility of anyone else laying last mile copper.
Just because initial capital investment costs are high does not mean a service will not be provided. New airlines still pop up even though the cost of purchasing an airline fleet is enormous. Japanese car companies went from relatively small operations to global leaders in just a few decades, even though the fixed capital needed to mass produce automobiles is astronomical. Sprint has no problem spending billions of dollars on Wi-Max, a new, untested technology with plenty of existing alternatives.
Research by Adam Thierer has shown that prior to AT&T convincing local officials to grant it a monopoly, there were over 200 phone companies in some states, and AT&T had less than 50% market share in the nation as prices dropped rapidly. As DiLorenzo points out, when localities have decided to let a second company build cable lines, the result has been a resounding success for consumers. In Riviera Beach, Florida; Presque Island, Maine; and Sacramento, California, when cable companies were allowed to compete the result was enormously beneficial to consumers.
The current regulated system is a clear failure. As several other posters have explained, because CLECs pay what the government says they pay, nobody wants to invest in upgrading infrastructure, adding more central offices, or upgrading last mile copper. Even in dense, wealthy urban areas, lots of people live too far from their CO to get decent speed. VDSL is limited to around a mile from the CO.
With the Telecommunications Act of 1996, things worked pretty well for a while. But after a few years, when the need for adding equipment and modernizing infrastructure grew imminent, the lack of incentives to invest have started to drag the telcos behind the cable companies. The only major effort by an incumbent in the last decade has been FIOS, which doesn't face the same rules as copper. DSL hasn't come nearly as far as cable in the last few years, and with DOCSIS 3.0 and SDV emerging the gap will continue to grow. Why? Because cable companies are spending billions at upgrading, while telcos are dragging their feet because copper is regulated to the point of discouraging investment.
Regulating prices may seem like a good idea at first glance - but forcing the telcos to let competitors share access reduces investment in upgrading facilities that need modernization.
The Progress & Freedom Foundation recently published an empirical examination finding a positive correlation between flexible pricing and incumbent investment. The report reaffirms what economics tells us: lower profit potential in a market segment means less investment. Somebody has to be willing to throw down some serious cash to increase the bandwidth of central office. But incumbents tend to divert resources to more lucrative ventures if CLECs can reap the benefits without taking any of the risk. Sure, CLECs have to pay wholesale prices plus rate of return, but there's no risk in that proposition-except for the incumbent. Phone companies allocate the most resources to areas where the FCC does not regulate prices.
There is real competition in the market for high-speed internet access. Business cable, DSL, satellite internet, 3G, fixed wireless, and now 4G/Wi-Max all compete with T1 lines for workplace connectivity. These aren't perfect substitutes yet, but they keep getting better as DOCSIS 3.0 starts to be implemented and wireless broadband gets faster and cheaper. The upcoming 700mhz auction will mean even more growth in this area.
The FCC is making the same mistake the FTC made with the XM-Sirius merger, or the Staples-Office Depot merger. Just because the market for a specific product may have 1 supplier doesn't mean its a monopoly-as long as substitutes exist, there will be price competition.
Phone service isn't a natural monopoly anymore. The duplicative cost of having multiple carriers is tiny nowadays compared to the massive welfare gains from competition. And if phone service really is a natural monopoly, why does the FCC need to insulate telcos from competition? Shouldn't the market gravitate towards 1 supplier without government intervention? In 1934, under political pressure from AT&T, the FCC began its disastrous policy of enforcing monopolies on telephone service. Ma Bell successfully lobbied Congress to entrench its monopoly status because upstarts were doing such a good job competing, so profit margins weren't as large as AT&T had become used to. Imagine a world where people had real choice for TV, phone, and internet. Franchising and universal service would have to be eliminated; but in this day and age if people want to live in rural areas, why should the rest of us have to suffer?
I certainly won't argue that the "bloat" is a good thing, but seriously, how hard is it to uninstall a few unwanted programs? We're not talking about malicious spyware or anything - Add/Remove Programs should do the trick. Also, reinstalling the OS and drivers can be done in 15 minutes on any new PC - especially those with SATA 3 Gb/S hard drives and DDR2-667 Dual Channel SDRAM.
The fact is that buying a Dell nets HUGE savings versus putting together a PC yourself. While Dell's proprietary parts often leave much to be desired in terms of quality, as long as you buy a PC in one of their higher-tiered Dimension or XPS lines, you generally will be in good shape.
So what if you have to remove a few programs? You're saving hundreds of dollars - its a pretty damn worthwhile tradeoff.
I'm not sure what calculations you did, but it seems to me that according to your CIA world fact book link, the linear trend line is Life expectancy = 0.2703*(Year of Birth) - 463, making someone born in 1972 have a life expectancy of 70.036 year, which is a few years longer than your prediction of 66 years.
So I was an early adopter, now I have to pay the price, watching as other gamers soon obtain the same console for the same price (presumably), but with a cooler processor that could even boost game performance. (speculation by TFA)
This sort of yearly one-upsmanship is to be expected of other console manufacturers (There's this "one company" who releases enhanced versions of basically the same product at least once a year, but the name of the company slips my mind...)
When the original Xbox was released and MS cut the price aggressively after a few months, they gave "credits" to early adopters who paid full price shortly after launch. Hopefully MS again recognizes its hardcore fans who acquired the 360 early in the production cycle will expect some sort of compensation for their willingness to purchase a console with apparent heat/performance issues.
I recently purchased a Gateway FPD2185w 21" widescreen 1680x1050 monitor. It is AMAZING value. For about $500, I get a display with DVI-HDCP support, along with VGA, Component, S-video, and RCA inputs. Its got DCDi by Faroudja for flawless 1080i/480i deinterlacing, and top-notch scaling video processing with a 12ms response time. It looks fantastic with my PC via DVI, Xbox 360 via VGA, and Dish HD DVR via Component. Also, the customizable PiP options are very useful.
Furthermore, when Vista comes out and the MPAA studios start implementing ICT on HD DVD/Blu-Ray discs, I won't have to buy a $300 Spatz HDCP stripper to view the full resolution 720p picture on my monitor.
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Natural monopolies really don't occur very often compared to the myth perpetuated by greedy rent-seekers like AT&T and Comcast. Sure, in Econ 101, the argument is made that the duplicative effects of having multiple companies run wire to each home are so high that the marketplace can only sustain 1 profitable company. But the market is "dynamic and rivalrous," meaning that technological forces ensure no single company will maintain the lowest average cost curve for very long.
Currently, the FCC prevents any other company from laying down wire (not to mention a myriad of local and state regulations). But how can we know if competition can sustain itself unless we give it a chance? Cable companies and telcos have essentially bought off public officials, offering a cut of their huge profits if local lawmakers will grant them government-enforced monopoly status.
Laying wire isn't cheap, but if you look at rate of return for telcos in unregulated services it's close to 50%. A second competitor may have to undertake a large initial capital investment to enter the market, but there is so much demand for packet-based services that multiple companies could coexist and still make money. After all, we have 2 sets of wires running currently with much the same services increasingly available (triple play) and cable was only installed a few decades ago. Even if no one enters, the potential for entry itself deters monopolistic pricing-as opposed to the current system where the telcos and cable companies do not even face the theoretical possibility of anyone else laying last mile copper.
Just because initial capital investment costs are high does not mean a service will not be provided. New airlines still pop up even though the cost of purchasing an airline fleet is enormous. Japanese car companies went from relatively small operations to global leaders in just a few decades, even though the fixed capital needed to mass produce automobiles is astronomical. Sprint has no problem spending billions of dollars on Wi-Max, a new, untested technology with plenty of existing alternatives.
Research by Adam Thierer has shown that prior to AT&T convincing local officials to grant it a monopoly, there were over 200 phone companies in some states, and AT&T had less than 50% market share in the nation as prices dropped rapidly. As DiLorenzo points out, when localities have decided to let a second company build cable lines, the result has been a resounding success for consumers. In Riviera Beach, Florida; Presque Island, Maine; and Sacramento, California, when cable companies were allowed to compete the result was enormously beneficial to consumers.
The current regulated system is a clear failure. As several other posters have explained, because CLECs pay what the government says they pay, nobody wants to invest in upgrading infrastructure, adding more central offices, or upgrading last mile copper. Even in dense, wealthy urban areas, lots of people live too far from their CO to get decent speed. VDSL is limited to around a mile from the CO.
With the Telecommunications Act of 1996, things worked pretty well for a while. But after a few years, when the need for adding equipment and modernizing infrastructure grew imminent, the lack of incentives to invest have started to drag the telcos behind the cable companies. The only major effort by an incumbent in the last decade has been FIOS, which doesn't face the same rules as copper. DSL hasn't come nearly as far as cable in the last few years, and with DOCSIS 3.0 and SDV emerging the gap will continue to grow. Why? Because cable companies are spending billions at upgrading, while telcos are dragging their feet because copper is regulated to the point of discouraging investment.
Regulating prices may seem like a good idea at first glance - but forcing the telcos to let competitors share access reduces investment in upgrading facilities that need modernization.
This op-ed in the Washington Times today does a great job explaining why regulating special access would be a bad idea. http://washingtontimes.com/article/20071011/COMMENTARY/110110009/1012
The Progress & Freedom Foundation recently published an empirical examination finding a positive correlation between flexible pricing and incumbent investment. The report reaffirms what economics tells us: lower profit potential in a market segment means less investment. Somebody has to be willing to throw down some serious cash to increase the bandwidth of central office. But incumbents tend to divert resources to more lucrative ventures if CLECs can reap the benefits without taking any of the risk. Sure, CLECs have to pay wholesale prices plus rate of return, but there's no risk in that proposition-except for the incumbent. Phone companies allocate the most resources to areas where the FCC does not regulate prices.
There is real competition in the market for high-speed internet access. Business cable, DSL, satellite internet, 3G, fixed wireless, and now 4G/Wi-Max all compete with T1 lines for workplace connectivity. These aren't perfect substitutes yet, but they keep getting better as DOCSIS 3.0 starts to be implemented and wireless broadband gets faster and cheaper. The upcoming 700mhz auction will mean even more growth in this area.
The FCC is making the same mistake the FTC made with the XM-Sirius merger, or the Staples-Office Depot merger. Just because the market for a specific product may have 1 supplier doesn't mean its a monopoly-as long as substitutes exist, there will be price competition.
Phone service isn't a natural monopoly anymore. The duplicative cost of having multiple carriers is tiny nowadays compared to the massive welfare gains from competition. And if phone service really is a natural monopoly, why does the FCC need to insulate telcos from competition? Shouldn't the market gravitate towards 1 supplier without government intervention? In 1934, under political pressure from AT&T, the FCC began its disastrous policy of enforcing monopolies on telephone service. Ma Bell successfully lobbied Congress to entrench its monopoly status because upstarts were doing such a good job competing, so profit margins weren't as large as AT&T had become used to. Imagine a world where people had real choice for TV, phone, and internet. Franchising and universal service would have to be eliminated; but in this day and age if people want to live in rural areas, why should the rest of us have to suffer?
I certainly won't argue that the "bloat" is a good thing, but seriously, how hard is it to uninstall a few unwanted programs? We're not talking about malicious spyware or anything - Add/Remove Programs should do the trick. Also, reinstalling the OS and drivers can be done in 15 minutes on any new PC - especially those with SATA 3 Gb/S hard drives and DDR2-667 Dual Channel SDRAM. The fact is that buying a Dell nets HUGE savings versus putting together a PC yourself. While Dell's proprietary parts often leave much to be desired in terms of quality, as long as you buy a PC in one of their higher-tiered Dimension or XPS lines, you generally will be in good shape. So what if you have to remove a few programs? You're saving hundreds of dollars - its a pretty damn worthwhile tradeoff.
I'm not sure what calculations you did, but it seems to me that according to your CIA world fact book link, the linear trend line is Life expectancy = 0.2703*(Year of Birth) - 463, making someone born in 1972 have a life expectancy of 70.036 year, which is a few years longer than your prediction of 66 years.
So I was an early adopter, now I have to pay the price, watching as other gamers soon obtain the same console for the same price (presumably), but with a cooler processor that could even boost game performance. (speculation by TFA) This sort of yearly one-upsmanship is to be expected of other console manufacturers (There's this "one company" who releases enhanced versions of basically the same product at least once a year, but the name of the company slips my mind...) When the original Xbox was released and MS cut the price aggressively after a few months, they gave "credits" to early adopters who paid full price shortly after launch. Hopefully MS again recognizes its hardcore fans who acquired the 360 early in the production cycle will expect some sort of compensation for their willingness to purchase a console with apparent heat/performance issues.
I recently purchased a Gateway FPD2185w 21" widescreen 1680x1050 monitor. It is AMAZING value. For about $500, I get a display with DVI-HDCP support, along with VGA, Component, S-video, and RCA inputs. Its got DCDi by Faroudja for flawless 1080i/480i deinterlacing, and top-notch scaling video processing with a 12ms response time. It looks fantastic with my PC via DVI, Xbox 360 via VGA, and Dish HD DVR via Component. Also, the customizable PiP options are very useful. Furthermore, when Vista comes out and the MPAA studios start implementing ICT on HD DVD/Blu-Ray discs, I won't have to buy a $300 Spatz HDCP stripper to view the full resolution 720p picture on my monitor.